VC Perspectives From A Former Entrepreneur - Jeff Bussgang

3 posts from January 2013

January 23, 2013

The day after President Obama was inaugurated for a second
term, I was invited to speak at the (MUCH smaller) inaugural meeting of the
newly formed Congressional Caucus on Innovation and Entrepreneurship. The caucus is a bi-partisan group, created by
Rep. Jared Polis (D-CO), Darrell Issa (R-CA), Vern Buchanan (R-FL) and Gary Peters
(D-MI), to focus federal policy efforts on supporting startups and innovation.

I have to admit my expectations were pretty low. After my euphoria over the passing of the
JOBS Act last year, the latest fiasco over the fiscal cliff have me pretty down
on Washington’s ability to get anything done that will help create a more
robust business environment. I have been
to DC a few times with the policy business group I helped co-found, The
Alliance for Business Leadership, and every time I’m there, I’m struck by the
contrast with the more thrilling, action-oriented world of startups and venture
capital.

That said, the House Members and staffers seemed genuinely
interested in the components of a vibrant start-up ecosystem. I gave them a briefing of why Boston and NYC
have such vibrant start-up environments, with the former being in the midst of
a renaissance and the latter emerging from nowhere over the last 5-10 years to
legitimately become one of the world’s major start-up centers.

I also observed the important cultural
characteristics of successful start-up ecosystems. They are open, diverse, inclusive, welcoming
of outsiders/immigrants and creative types, and rich in information exchange.

Today, Boston and NYC are shining examples of these
elements. Boston has always had rich
intellectual capital, but was historically weaker in the cultural
characteristics than it is today. The
angel community has also stepped up in a more meaningful way recently, which
has been very positive.

NYC has historically fallen short on intellectual capital, but
that has changed dramatically in recent years with all the talent streaming out
of Wall Street and Madison Avenue into start-ups. Further, following the interesting
entrepreneurs and ideas, there’s been an explosion in NYC’s angel community. This has led to an environment that has never
been more promising.

With the audience being a policy one, I gave some simple
advice to policy makers: avoid getting
involved in areas where government doesn’t have a role (e.g., picking winners
with targeted tax breaks) and focus instead on fundamentals (e.g., education,
infrastructure) and policy issues that matter to entrepreneurs (e.g.,
immigration reform, reforming community and state colleges to fit the needs the
start-up employers, and capital formation issues like crowdfunding). I gave a nod to local government leaders like
Governor Patrick and Mayor Bloomberg who have been terrific champions in their
respective communities. When you ask local business leaders, they will all tell
you that those two politicians “get it”.

I can’t predict whether this new caucus will have an impact,
but clearly comprehensive immigration reform is on Congress’ short list for
important initiatives in 2013 and Rep. Polis was one of the co-sponsors of the
Start Up Visa Act, so he clearly “gets it”.
If every entrepreneur reached out to their House Representative and
encouraged them to join this Caucus, perhaps it would have a small impact. Meanwhile, I was happy to leave Washington DC and get back to action-oriented Start Up Land!

January 14, 2013

Today's post is brought to you by my friend, Paul Blumenfeld, a recruiter who is one of the most thoughtful people I know when it comes to hiring processes. Since the topic is so fundamental to the company-building process, I am pleased Paul agreed to share his thoughts.

When my wife and I got engaged, we had barely clinked champagne
glasses when a friend asked when we would be visiting Crate and Barrel to
register for wedding gifts. The idea
sounded appealing enough, but we couldn’t think of anything we actually needed. So we created a wish list of things
we thought we needed, like designer flatware, gold-rimmed china, and a blender
that makes bread dough.

As it turned out, the best gifts we received on our wedding day
were the thoughtful, unique gifts from people who knew us well and understood
our day-to-day needs. We also loved the gifts we simply never expected.

I often compare our gift registry experience to the way many
companies write job specs. What should serve as a helpful set of guidelines to find
the right candidate typically devolves into an inflated “wish list” of qualities
and talents that sound good at the time, but aren’t practical or even possible
to find in one person.

If I looked back at every job I’ve filled during my 15 years of
recruiting and compared the company’s job spec to the person they actually hired,
I suspect I would see a significant gap between their wish list and “the gift”
they got.

I see two reasons for this discrepancy:

Static Specs. Many hiring managers write a job spec
that is heavy on wishes and low on real needs. They continue to use the
same or similar spec throughout their search without re-evaluating it. With
each candidate interviewed, the hiring manager learns something new about
what they are looking for and what the real job requirements might be, but
the job spec is rarely updated to reflect what they've learned.

Like Pornography? Companies
aren’t always clear on what they’re looking for until the right candidate
walks through the door—which brings to mind Supreme Court Justice Potter Stewart’s “I know it when I see it” phenomenon. For many companies, the "best athlete" will
get the job regardless of how closely they match the spec.

It
is frustrating when I learn that a client has hired a great candidate that I already
knew, but decided not to send over because, judging from the job spec, they
weren’t a great match. Needless to say, I’ve learned my lesson and now take the following five approaches to solve this job spec
ambiguity problem:

Archteypes. I
ask clients to show me
a bio or LinkedIn profile for a candidate whom
they’ve made an offer to recently, or on someone they consider ideal for
this position. Very often, seeing a real person’s bio is much more
informative than seeing a job spec. Reviewing the details of a real person
can help me better understand what the hiring manager is looking for, and
I get a true feel for the personthat would get the
job,
not the resumethat would get the interview.

Short and Sweet. I recommend that
my clients boil down their job spec “must-haves” to only one or two items.
I have a client who spends a lot of time creating very detailed specs for
all of their engineering openings, and in doing so I find their real needs
get lost. For example, “Candidate
must have deep CS knowledge and know their data structures and algorithms
inside and out” is a clear message and points me in the right direction. Based
on those two imperatives, I can quickly find the best person out there
with these skills and, because "I
know it when I see it", the client likes the candidate and gives them
the job.

Be Open-Minded. I also ask
hiring managers to be open-minded about their must-haves. A candidate’s
experience may not match perfectly to what the hiring manager is initially
asking for, but sometimes a candidate will have skills from a previous
position that prove to be extremely valuable in a new position. For
example, I was doing a search for a VP of Engineering for a company that
was building a stock-trading platform. “Experience in financial services
or a trading platform a must!” The VP of Engineering I placed there,
however, had spent his entire career leading real-time software
development at successful data communications startups. His real-time
experience, and the time he spent at successful start-ups, proved to be his
most valuable assets.

Culture. I
think of a company as a cultural community with social needs, not a
machine that needs a specific part plugged in. Finding a candidate who is
not only great at what they do but who also fits well into that company’s
culture is going to have a better shot at getting the job and succeeding
at the company long-term. For example, does the candidate rock climb or
brew beer in her spare time? These qualities may not make her a better CTO
or VP of Product, but they may make her “click” with a like-minded hiring
manager and be more successful in a given company community.

Hire Winners
- If a candidate is coming from a winning environment, he or
she is more likely to know how to win.
They will bring this culture with them when they join your
company. I look for candidates
that have worked for companies that have built highly regarded products
and have worked with people who have had previous, profitable
outcomes. The caveat there,
however, is that there are often many people looking to take credit for a
winner’s work. Like the old proverb says, “Success has many fathers,
failure is an orphan.”

So how much do job specs really
matter? They are an objective element to a mostly subjective process. They are
also, however, an important starting point. And the more realistic, concise and
flexible the job specs are, the more successful the hiring process will be.
Just beware of the job spec “wish list.” After all, do you really want a
blender that can make bread dough, or do you actually want a blender that makes
really good frozen margaritas and milk shakes?

January 07, 2013

Clench (the teeth), esp. in order to keep one's resolve when faced with an unpleasant or painful duty.

2013 is going to be an "interesting" year (evoking the Chinese curse). The macroeconomic environment looks spotty at best, with analysts like Jeremy Grantham predicting 1% growth in the US for decades to come. Europe is still a mess and in a deep recession. Japan is in a decades-long tailspin. And the so-called BRIC countries are forecasting tepid growth (we could rename them "ICK" if we added in Borat's home of Kazakhstan and dropped Brazil and Russia...)

One word: grit. Tough it out, people. This start-up stuff isn't easy. It never has been.

Mark Suster captures this sentiment nicely in this post "Entrepreneurshit". I won't repeat the feeling of dread, despair, humiliation and frustration that he so ably (and painfully) reviews. Unfortunately, 2013 will see plenty of it for start-up executives. So here are a few tips to help you grind through the coming year and come out stronger on the other side:

Maintain Your Foundation. Whatever it is that allows you to find meaning in your life - your spouse, kids, parents, friends, a dog - nurture it and hold it dear. Be maniacal about maintaining your health. Even if you're travelling like crazy, exercise and eat well. I find that entrepreneurs with strong foundations are able to focus much more effectively than those that are distracted with unhappy personal lives.

Keep the End In Mind. This piece of advice borrows from one of the late Steven Covey's 7 Habits of Highly Effective People. Envision the ideal end state that you are striving for in 2013. Write it down. Write down the two or three subgoals that fit beneath this overarching goal, including two or three interim milestones. Have it as a one-pager that you keep with you always. It will help sharpen your focus day to day and prevent you from getting lost in the daily flurry of activity we all face. And speaking of day to day...

Be Great Every Day. The thing that is hard about gritting through a tough year is that you feel that so much of it is out of your control. But you can control what you do each day. Don't allow yourself to sleep walk through each week, trudging through the muck in a daze. Simply put, in the face of adverse conditions, be great every day. End each day feeling that you delivered a great day against your objectives and don't allow yourself to settle for anything less.

Maintain Options. When I first learned how to value options in the stock market, a light bulb went off. Options have value! When slogging through a tough year -- such as a new product that just won't ship cleanly, or a fundraise that just won't get traction -- remember to create options for yourself. In addition to your plan A, develop a credible plan B and C. Don't allow the failure of a single initiative to be a dead end.

Good luck. As Ronald Reagan famously advised his White House successor (and one of my favorite children's animated authors captures in a cute book), Don't let the turkeys get you down.